Tuesday, November 21, 2006

Calls of Note Part 4

- FBR notes their recent checks have provided more color with regard to expected NVIDIA (NASDAQ:NVDA) and PLAY content in upcoming iPod designs. They believe NVDA has been designed into the upcoming video iPod, and that PLAY has been designed out (both consistent with prior speculation). Firm also believes that PLAY has been designed into the upcoming iPhone (which they don't think is in consensus). They also believe that NVDA's acquisition of PLAY gives it an inside track at providing an integrated applications / video processor in a future video iPod for 2008. Net, they expect combined PLAY and NVDA music player revenue of $280 million in 2007, following the close of the PLAY acquisition, with the potential for further revenue from an enhanced Apple relationship in the future.

Firm believes the next generation video iPod will use NVDA's video processor and Samsung's application processor. Check also confirmed that PLAY's application processor would be designed out of the video iPod, to be replaced by Samsung. firm alsos believe NVDA will provide the video processor, displacing BRCM, due to NVDA's advantage of lower power consumption. While NVDA's participation in the iPod is not a complete surprise by now, it's also not in current estimates. Firm expects $100 million in incremental 2007 revenue from the video iPod, assuming 14 million units in 2007.

Notablecalls: NVDA being designed into the iPod is not news. Nor is news that PLAY has been designed into the upcoming iPhone. NVDA looks pretty much as RIMM looked yesterday. But I suspect the call isn't powerful enough to create such buy interest. Anyone disagree?